Balance Of Payments Problems Research Articles

The behavior of demand and supply of Thai imports

Using annual observations for the years 1961–1985, this paper estimates demand and supply of Thai imports. Statistical results indicate that both demand and supply are inelastic with respect to their own-price and the price of substitutes in the short-run. In the long-run, demand is unitary elastic with respect to its own-price, and income, and elastic with respect to price of other goods. Supply is highly elastic in the long-run with respect to both its own-price and the price of substitutes. Therefore, demand management policies seem to be an effective approach to deal with the balance of payments problems.

Gold distribution in lateritic profiles in South America, Africa, and Australia: applications to geochemical exploration in tropical regions

Gold, a principal ore commodity, is sought in third world countries, which are situated mainly in the tropics, where extensive lateritic terrains exist. The high value of gold on the international market and balance of payment problems cause gold to be especially important. Present intensive propecting for gold in the Third World countries are, for those reasons, in lateritic terrains. Laterites, formed during the Tertiary and the Recent in inner tropical morphoclimatic zones covered by dense rain forests, in places such as the Amazon region and West Africa, are presently undergoing strong weathering and erosion that truncates lateritic profiles. Consequently, the thick soils still forming today cover in different places, different parts of truncated profiles. Samples of thick soils taken from the surface down, may begin not at the original top of the laterite but somewhere along the profile. Inasmuch as elements in lateritic profiles are not homogeneously distributed, problems in interpretation can result. Gold distribution in non-truncated laterites tends to be sigmoidal in distribution. Two convexities (highest contents) can be distinguished: one in surficial iron crusts or equivalents, the other at the base of saprolite. The sigmoidal curve can be cut off, strongly modified, or concealed by tropical weathering. The intense weathering can diminish concentrations, i.e., elements can be dispersed. Geochemical exploration becomes difficult, because interpretations of the geochemical anomalies based on high concentrations becomes unreliable. If the amount of truncation of lateritic profiles can be assessed, weak or even negative anomalies can become as good or better than strong anomalies.

Monetary Policy and Stabilization Problems in Bangladesh: Some Current Issues

Bangladesh has been subject to balance of payments difficulties since its inception. The government first tried to improve this situation with traditional monetary measures but experienced disappointing results. Among other reasons, this failure can be attributed to the fact that the balance of payments problems in Bangladesh are, in general, the consequence of rigidities of demand and supply in various factor and product markets. In line with this assessment, the World Bank and the International Monetary Fund persuaded Bangladesh to embark upon a medium- term, comprehensive Structural Adjustment Facility plan in the mid-1980s. This paper is a critical evaluation of this plan and Bangladesh's recent macroeconomic experiences.

Regional Balance of Payments Problems: An Interpretation

HO L.-S. (1993) Regional balance of payments problems: an interpretation, Reg. Studies 27, 457–466. This paper lays out a simple model and an accounting framework for analysing the relationship between different components of regional savings and investment, between internal savings and external savings, and between government sector savings and private sector savings. In general, stepping up investment to enhance regional growth must cause a deterioration of the regional trade balance in the short run, even though the trade balance is likely to improve in the longer run. Analyses in recent years often ignore the effect of capital formation on trade. As an example, the German unification, in requiring a rebuilding of capital stock suddenly rendered obsolete by a major change in relative factor prices, requires a real appreciation of the DM and a deterioration of the German trade balance. Given nominal exchange rates, this means higher German inflation than its trading partners. On the other hand, the pape...

Testing the Link Between Devaluation and Inflation: Time Series Evidence from Ghana1

Policy makers in Africa often argue that devaluation leads to inflation. This is undesirable in itself and also because the inflation mitigates any impact that the nominal devaluation has on the real exchange rate, which is what one hopes to change in the face of balance of payments problems. This paper argues that, under the extensive trade and exchange restrictions that are common in Africa, devaluation of the official exchange rate should have little impact on domestic prices. It tests that hypothesis with time series techniques due to Box and Tsiao (1975) using data from Ghana for the period 1974-86 when exchange controls were severe. The paper's main conclusion is that devaluations in Ghana have had a small but statistically significant impact on the domestic CPI: for a 100 percent increase in the exchange rate, prices rise by 5 to 10 percent. Copyright 1992 by Oxford University Press.

THE UK'S PERSISTENT TRADE DEFICIT

The UK current account deficit reached a peak in excess of £20bn in 1989, equivalent to 4 per cent of GDP. In the next two years, as recession took its toll of domestic spending, it shrank quickly - on the latest data the deficit was only £4.4bn last year, 3/4 per cent of nominal GDP. Over the same period the trade gap narrowed front £25bn to £10bn, in each case taking the deficit back to the levels of 1987, before the late 1980s' boom really got under way. Since 1989, therefore, both 011 trade and the current account, there has been a significant reduction in the external deficit. Yet it remains the case that, despite the length of the recession - non-oil GDP has fallen for six successive quarters - the current account is still in deficit. Moreover, despite there being no concrete data to point to the beginnings of recovery, the shortfall is widening. The low point was the second quarter of last year, with a rare current surplus recorded in June, since when the trade deficit has steadily widened again as the consequence primarily of a 5.5per cent increase in the volume of imports over the last 12 months. Why is it that, in contrast with the experience in the 1980-81 downturn, this recession has not produced a trade or even a current account surplus? Does this mean that the recovery, when it does come, will inevitably widen the deficit with the possible consequence that ‘balance of payments problems’ will undermine the pound inside the ERM? We conclude that, while it is disappointing that UK producers have not managed to claw back more of the domestic market - in contrast with the experience of exporters in world markets - our forecast of a current account deficit of 0–2 per cent of GDP should be relatively easily financed and will riot therefore cause serious problem for economic policy. This conclusion would riot necessarily hold if the recovery occurs more rapidly than we expect arid sucks in a greater volume of imports. It may be the case that the UK will continue to run a current deficit with Japan in particular as the counterpart to ongoing Japanese direct investment in this country.

Towards a macrometric policy model of a semi-industrial economy: The case of Egypt

The ultimate aim of the author is to provide an econometric policy model of Egypt with the capability to portray the fundamental interactions between the financial sector, balance of payments, producing sectors and prices. The model should take due consideration of the structural and institutional peculiarities of the Egyptian economy and its policy making institutions, and integrate the appropriate policy instruments, targets, and the constraints imposed on policy makers by both systematic behaviour and institutional factors. This was attempted (for the period examined) and the model reported goes some way to providing a quantitative framework for coordinating macropolicies to tackle Egypt's economic ailments: its balance of payments problems, industrial excess capacity, and the budget deficit in relation to financing development programmes. In designing the model, the author attempted to strike a balance between theoretical soundness, realism and compactness. As is stands, the model consists of 31 behavioural equations and 9 identities, institutional and definitional.

The International Adjustment Process: New Perspectives, Recent Experience and Future Challenges for the Financial System

A Opening Addresses.- I Introduction.- II The Role of Financial Markets in the Adjustment Process: the Finnish Experience.- III The International Adjustment Process.- IV Problems of Adjustment in Developing Countries.- B Current and Potential Balance of Payments Adjustment Problems.- V External Adjustment in Small Open Economies - Some Recent Experience.- VI Balance of Payments Adjustment Processes in Japan.- VII US External Adjustment in Response to the Lower Dollar: the J-Curve.- VIII Balance of Payments Adjustment Problems - the Case of West Germany.- C The Modus Operandi of The Process of Adjustment.- IX Current and Prospective Balance of Payments Problems.- X Policy Design in the Face of a Terms of Trade Shock.- XI Financial Interdependence and External Adjustment: Some Problems Posed by US Federal Government Indebtedness.- XII Mode Operatoire D'ajustement et Marches Speculatifs - Premiers Enseignements de la Crise Financiere Recente.- D Adjustment Policies.- XIII Exchange Rate Target Zones, the Louvre Accord and Policy Coordination.- XIV Reflections on World Economic Imbalances.- XV The International Economic Adjustment Mechanisms and the Coordination of Economic Policies.- XVI Recent Experience of International Monetary Policy Cooperation.- XVII The International Monetary System: Recent Developments and Key Issues.- E Special Problems of Adjustment in Developing Countries.- XVIII Special Problems of Adjustment in Developing Countries.- XIX Private Capital Flows and Developing Country Adjustment: Some Lessons of the Debt Crisis.- XX The Exchange Rate in the Adjustment Process of Less Developed Countries - a Multifarious Role.- XXI Foreign Lending Revisited 1880-1980.- F Concluding Address.- XXII Issues in International Economic Management.

Economic Viewpoint: Economic Models and Economic Forecasting: Ptolemaic or Copernican?

Economic forecasters have come in for a lot of criticism in recent months. But this is not new. The failure to predict the boom in 1988 and ensuing inflation and balance of payments problems led to some serious re-examination of the structure of the main macroeconometric models in the UK. The speed with which the UK economy moved into sharp recession in the second half of 1990- also appeared to catch most forecasters on the hop. This Briefing Paper is not directly about forecasting; it is about macroeconometric models. However, forecasting provides by far the most extensive use of these models. Not all macroeconomic forecasters use a formal econometric model - some City economists find a spreadsheet more than adequate - but those that do find that they are an invaluable aid to clear thinking and provide an effective way of filtering all of the information that is available, in one form or another, about the economy. This paper was originally intended to provide a retrospective review of the development of UK macro-models since the late 1970s, coinciding broadly with my period at London Business School. However, it became clear that there was a need to argue more generally in favour of macro-modelling, given the numerous assaults that this activity has sustained over the last 15 years. I want to demonstrate that the conduct of research in this area - at the very least in the UK - has been, and continues to be, a progressive research strategy in the sense in which philosophers of science use this term. I believe that macro-modellers, because they have an obligation to forecast and to make the forecast public, are closer to how theoretical constructs in economics conflict with the observation of economic events, and provide a more robust testing ground for economic theories than the relatively narrow - though very important - confines of single equation statistical testing, that dominate academic journals. This should not mean that every new theoretical idea should be expected to be able to survive immediately the rigours of testing within an existing macro-model. One of the attractions of recent developments in macroeconomic theory has been an explicit attempt to seek to try to reconcile macroeconomics with micro-economic reasoning and to derive macroeconomic principles from how rational, maximizing individuals can be expected to behave in a market economy. There is always a need periodically to re-examine the basic postulates of any area of economics, especially one such as macroeconomics, which provides the basis for the conduct of national and international economic policy, and for providing explanations for economic cycles. Macro-econometric model building is a worthwhile exercise because it confronts theoretical models of how the macro-economy is supposed to work with the hard lessons of experience. The use of these models for forecasting is therefore crucial to their continued growth and development.

Funding, selected issues and trends in Tanzania higher education

The purpose of this article is to discuss the funding constraints as related to higher education in Tanzania. The article discusses also the trend of internal and external efficiency indicators. The funding constraints include: the low growth rate of GDP, balance of payment problems, inflation, devaluation of the shilling, absence of cost-sharing and resources mismanagement. Higher education is characterized by high unit costs, low capacity utilization and high teacher-student ratios and yet private benefits are high as compared to social benefits. Tanzanian higher education remains elitist and continues to serve a well-to-do minority.

Financial facilities of the IMF and the food deficit countries

The International Monetary Fund has various lending facilities which are available to food deficit countries to help them meet their balance of payments problems. This Viewpoint shows how the use of these facilities has evolved in response to changes in the global economic environment and to the specific needs of Fund members

Tanzania and the World Bank's urban shelter project: ideology and international finance

Yet the economic and political record clearly indicates that, while mistakes have been made, the problems of development which are now directly associated with increasing balance of payments problems have not been due to any iconoclastic 'socialist' belief in the power of centralized planning. On the contrary, planning has consistently been subordinated to the more pressing political cum financial issues dictated, in the first instance, by the exigencies of growing national debt and, second, by the pressures and arguments of the aid agencies on which Tanzania has become increasingly dependent for funding her development and recurrent budgets since the early 1970s.

Limits to agricultural project evaluation under structural adjustment in developing countries

It is difficult in less developed countries to make unbiased estimates of economic factors. With persistent unemployment and chronic balance of payments problems due to structural factors, markets are likely to be in disequilibrium. Many of the standard methods of project evaluation fall down because of the dramatic effect that something like an increase in the average life expactancy or a change in the per capita consumption can bring. The alternative is to adopt some paternalistic rules in order to supplement and if necessary over-ride the normal rules.

The J‐Curve

AbstractIf a country with a balance of payments problem, that is, insufficient foreign exchange receipts to meet foreign exchange requirements, seeks to remedy the situation by currency devaluation, things may get worse before they get better. This so‐called J‐curve effect occurs if the domestic‐currency prices of exports are sticky, whether because they are cost based or subject to longer term contracts, so that export prices in foreign currency fall. Until favourable volume effects outweigh the unfavourable price effect, the balance of payments deteriorates. Such a J‐curve effect should be distinguished both from the longer term erosion of the beneficial effects of devaluation as domestic costs and the prices of non‐tradables rise and from the apparent J‐curve due to the ‘valuation effect’. If the current account is in deficit before devaluation, as will usually be the case, devaluation will widen the deficit in domestic currency because domestic‐currency imports rise by a larger amount than exports. This is a pure valuation effect, of no significance for external balance. But it is liable to lead to unduly pessimistic judgements about the effectiveness of devaluation. In Australia during 1985–86, the current account deficit increased by $A3.5 billion, despite substantial depreciation of the $A. The main reason was a sharp deterioration in the terms of trade which is estimated to have worsened the current account by $A4.25 billion. Most of this was exogenous, though J‐curve effects may have made a contribution. In addition, the valuation effect contributed a further, illusory, widening of the deficit, valued in domestic currency, by over $A1 billion. To avoid misleading inferences from the valuation effect, it is suggested that the balance of payments should, if possible, be presented in foreign currency.

Origins of pre‐revolutionary Iranian economic cycles and policy response

Iran's post-war economic history falls into four rather distinct stages. The first covers the period up to 1963 and was characterized by a relatively low rate of growth of about 5.5 per cent in constant prices between 1959 and 1963 (1959 is the starting point for most of the country's macroeconomic data) with nearly zero inflation. The second period covered the period 1964-70 (or 1973) and was characterized by a high rate of growth, about 10.5 per cent in constant prices, and increased inflation. The third phase, 1971 -77, was characterized by extremely high rates of growth concurrent with a seemingly accelerating rate of inflation. The final stage, 1978 to the present, has been one of stagnation with high rates of inflation. While these dates are somewhat arbitrary,' they do delineate four fairly distinct periods, each with its own particular characteristics. One thing that the first three stages seem to have in common is that during each period the economy, despite abundant oil revenues, began to suffer balance of payments problems that were both a cause and a consequence of political instability. The Iranian economy traditionally was able to absorb far more capital and consumer goods imports that it could support through foreign exchange earnings, thus forcing the government sooner or later to initiate fairly harsh stabilization measures. While much attention has focused on the third stage, an examination of the first two, particularly the first, is instructive because of the insights provided as to the workings of the economy and the way in which the government responded to the economic crisis of 1959, a response which perhaps because of its success at that time was not altogether different than the policies implemented nearly 20 years later by the government.

The Capital Account and Regional Balance of Payments Problems

Many regional issues can be expressed in terms of regional balance of payments accounts. This framework in turn highlights a feature of regional economics to which little attention is paid: inter-regional capital flows. It is the presumption that these flows accommodate demand which explains the apparent absence of regional balance of payments problems. In fact, if capital flows are not accommodating, then regional balance of payments problems may be more serious than for countries with separate currencies, since they require income adjustment. Having explained the balance of payments accounts in regional terms and the nature and significance of inter-regional capital flows, the paper concludes with a discussion of data requirements, with particular reference to the Scottish case.

The Export White Paper, 10 September, 1941

Britain fought two battles for survival during the Second World War: one was the conventional military struggle, the other was an economic one. The damage suffered by the British economy because of the war was enormous. Many of the destructive elements are well known but there were also less obvious ways in which the country's future economic prospects were damaged. Britain liquidated over $1.5 billion of her overseas assets for the war effort during 1940-I, thus losing future revenue which would have helped with her postwar balance of payments difficulties. By December 1940 her reserves were virtually exhausted and she was accumulating new liabilities at a frightening rate. In December 1941 they stood at $3 billion.2 Such depletions of, and burdens upon the economy were difficult enough to countenance in themselves, but when combined with the changes the war wrought upon Britain's international trade then the economic outlook became almost unbearably bleak. Britain's export trade declined by over 50 per cent during the war. For a nation whose prosperity, indeed very existence, depended upon trade this was a disaster of gigantic proportions. The British Government's main obsession during the war, military issues apart, was with Britain's prospective postwar balance of payments problem. This article is not concerned with how this was eventually solved, but with one aspect of how it came about: the Export, or Eden, White Paper of Io September 1941.3

IMPORTS AND DOMESTIC INFLATION IN LATIN AMERICA

In spite of the large volume of empirical evidence in favor of the monetary explanation of inflation, in many circles the phenomenon is still commonly attributed to other causes. A popular view, both at the level of financial press as well as in academic discussions, holds that the sustained and continuous rise in a country's internal prices is due in part, or even largely, to the increase in import prices. This view, which we will denote as the “import‐inflation hypothesis,” has many variants which are routinely stated in both official and private publications. Some variants stress the relevance of specific imports, particularly petroleum in recent years. The view is also reflected in the exagerated resistance to currency devaluations in countries with balance of payments problems.

Adjustment to what: Do we really have a balance of payments problem?∗

Adjustment to what: Do we really have a balance of payments problem?∗

Mexico's balance of payments 1970–1983: Contributions of international tourism and border transactions

The Mexican government instigated a series of programmes to redress its rapidly deteriorating balance of payments in the late 1970s and early 1980s. Devaluations of the peso were aimed at improving foreign exchange earnings from international tourism and border transactions, particularly with the USA. Although the net foreign exchange earned by these two sectors increased in 1982 and 1983, neither sector improved its net balance of real income and expenditure between 1975 and 1982. The impact of the devaluations, combined with depressed economic conditions in North America and Western Europe, affected both the inflow and outflow of international travellers and their level of expenditure, and limited real contribution to Mexico's balance of payments problems.